By Phoebe Seers
LONDON (Reuters) -Britain’s financial markets watchdog on Tuesday confirmed that it would stop publishing the identity of stock market short sellers, amid a wider push by UK regulators to cut red tape and make the country more competitive.
A short position is a bet that a company’s stock price will decline. Under the revised regime, the Financial Conduct Authority (FCA) will only publish anonymised, aggregate net short positions, based on private notifications from market participants holding more than 0.2% of a company’s shares.
The FCA also said it planned to extend the deadline by which short sellers are required to disclose a change in position and simplify the exemption from notification for market makers. The watchdog will consult on the proposals over seven weeks.
SHORT SELLING DISCLOSURE RULES INTRODUCED IN 2008
Britain introduced public disclosure rules for short selling in 2008, following the global financial crisis, amid concerns the practice was exacerbating sharp falls in stocks.
The FCA has powers to restrict short selling in exceptional circumstances or after a significant drop in a company’s shares, and in the consultation said it would seek feedback on how and when it applies its emergency powers.
The likely shape of the regime had already been welcomed by hedge funds and will align the UK more closely with the United States, which discloses only aggregate positions.
But the reduced transparency may not be welcomed by other institutional investors, said Patrick Sarch, partner at law firm White & Case.
REDUCED TRANSPARENCY FOR ISSUERS
“Ultimately, these changes won’t make a material difference to the efficiency or attractiveness of the UK market,” Sarch said. “There will be slightly less compliance friction for short sellers and their intermediaries, but at the expense of transparency for issuers and other investors.”
The overhaul follows legislation passed in January that gave the FCA new powers to shape short selling rules and set in motion some of the UK regulatory changes including anonymised reporting, replacing a framework inherited from the European Union.
Hedge funds had criticised the previous rules, arguing they led to herding behaviour and discouraged investment in proprietary research.
Rob Hailey, head of EMEA government affairs at the Managed Funds Association, an industry lobby group, said ahead of the FCA’s announcement that hedge funds supported the prospect of eased rules. “Smart reforms will enhance UK financial markets, attract investment, and support economic growth,” he said.
The hedge fund sector will continue to lobby the EU to implement similar changes, Hailey said.
(Reporting by Phoebe Seers, Editing by Iain Withers, Tommy Reggiori Wilkes and Conor Humphries)
